Hitachi Energy expands HVDC capacity as order book and earnings growth accelerate

Investment View and Valuation

Motilal Oswal Financial Services reiterated its Neutral rating on Hitachi Energy in its May 26, 2026 result update, despite strong operating momentum, as the stock’s valuation remains demanding. The broker raised its target price to Rs 32,000 from Rs 27,000, valuing the company at 60 times June 2028 estimated earnings.

At the report CMP of Rs 35,995, the revised target implied 11 per cent downside. The stock traded at 110 times FY27E, 75 times FY28E and 54 times FY29E earnings.

Q4 FY26 and Full-Year Financial Performance

Hitachi Energy’s Q4 FY26 results exceeded Motilal Oswal’s expectations on revenue and PAT, while EBITDA was broadly in line. Revenue grew 46 per cent year on year to Rs 2,754 crore, 7 per cent above the broker’s estimate. EBITDA increased 65 per cent year on year to approximately Rs 448 crore, although the EBITDA margin of 16.3 per cent was below the 17.1 per cent estimate because of lower-than-expected gross margin. Gross margin contracted 30 basis points year on year to 36.9 per cent.

PAT rose 84 per cent year on year to Rs 362 crore, ahead of expectations due to a lower-than-estimated tax rate. Q4 order inflow grew 11 per cent year on year to Rs 2,400 crore, taking the order book to a record Rs 29,600 crore, up 54 per cent year on year.

FY26 order intake was Rs 18,460 crore, up 1.6 per cent year on year. Domestic base and HVDC ordering were broadly flat excluding exports. Exports represented around 25 per cent of FY26 inflows and revenue, and 37 per cent of Q4 FY26 inflows.

Growth Drivers and Order Outlook

Management highlighted a three-pronged export model comprising feeder-factory supplies to parent entities, sales in allocated neighbouring markets, and component exports, including 66kV circuit breakers.

The order pipeline is supported by renewables, data centres, transmission, transformers and industries. Management indicated that the transmission pipeline is recovering after a temporary slowdown.

HVDC and Data-Centre Opportunities

HVDC is a major growth lever and is margin-accretive. It generated about Rs 1,100-1,200 crore of FY26 revenue, or 15 per cent of annual revenue. Management said there was no capacity constraint for additional HVDC projects over the next one to two years.

Data centres are another key opportunity. Management estimates that around 15 per cent of data-centre capital expenditure is addressable for Hitachi Energy, while India’s data-centre capacity is projected to increase from under 2GW currently to 13-18GW over the next few years.

Capacity Expansion and Capital Expenditure

Hitachi Energy announced an incremental Rs 2,000 crore investment for a greenfield large-power and HVDC converter-transformer facility at Karjan, Vadodara. Targeted for operation by Q4 CY28, the facility should add around 30-40 GVA of capacity and is additional to the Rs 2,000 crore capex programme announced in October 2024. Two additional power-quality lines are also being added in Bengaluru.

Management expects total incremental capex of Rs 4,000 crore to support approximately Rs 25,000-28,000 crore of additional revenue at 90 per cent utilisation from FY30 onwards, based on an asset-turnover ratio of about 7-8 times.

Broker Estimates and Earnings Outlook

Motilal Oswal expects order inflows to grow at a 13 per cent CAGR over FY26-28E, supported by stronger base orders and at least one HVDC order annually. It forecasts revenue, EBITDA and PAT CAGRs of 32 per cent, 47 per cent and 43 per cent, respectively, over FY26-28E.

The broker expects EBITDA margin to improve to 17.2 per cent in FY27E and 19.0 per cent in FY28E. It raised FY27E and FY28E EPS by 8 per cent and 6 per cent, mainly for below-EBITDA changes, while making marginal cuts to revenue and EBITDA estimates.

Key Risks

• Adverse execution mix could put pressure on margins.
• Elevated metal and freight costs amid geopolitical disruption could affect profitability.
• Incomplete commodity pass-through in certain contracts remains a risk.
• Commodity-price-variation clauses cover most of the order book, although royalty and technology fees paid to the parent, at around 7-8 per cent of sales, are expected to remain high.